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Foreclosures to take a Holiday Break.........no kidding!

From now until January 9^th, Fannie Mae and Freddie Mac announced that they are suspending foreclosures, pending the full implementation of a streamlined loan modification program. Loan mods as they are known, is the process by which a homeowner can "workout" a mortgage that better suites their income and ability to pay.

The new streamlined loan modification process is scheduled to begin around the middle of December and they are expected to ultimately prevent hundreds of thousands of foreclosures over time. But during this holiday period, Fannie Mae estimates 10,000 homeowners and Freddie Mac estimates another 6,000 homeowners will be helped by this suspension of foreclosures. This temporary suspension will give Fannie, Freddie and programs like New Hope along with approximately 27 other mortgage services ,time to get the streamlines process guidelines fully worked out and then to quickly begin implementation.

Foreclosure attorneys for both Fannie and Freddie were advised to contact as many homeowners as possible that were scheduled for foreclosure sale between Thanksgiving and Jan9th of this suspension and that no evictions were to take place at all during this period.

The simplified guidelines as we understand them for the modification process will be for those homeowners that are currently occupying their home and that are behind at least 3 months on their mortgage payments and have not already filed for bankruptcy protections. The other details will be announced when ready.

This action to suspend the foreclosures for the 6 week holiday period will give at least some relief for providing an opportunity to many of these homeowners to qualify for a loan modification. Not to mention the emotional relief of being able to remain in their homes over the holidays.

In other related news, it was reported here in San Diego county that Foreclosures in October had dropped 37% from September. According to the research team for Data Quick, the state senate bill that was signed into law in July but became effective in September, requires that lenders do more to try and help homeowners stay in their homes.

Like measures have been passed in many areas around the country and regretfully the results have shown that the slowing in the number of foreclosures is temporary. The loan modifications help with lowering the payments but not with the debt and therein is the problem of why these loan modifications only slow down the process. If the home is worth x and the loan is y, when y exceeds x, most of the long term incentive has disappeared.

Unless property values stop the free fall and begin the slow assent to increasing in value, the longer term issue of these foreclosures will most likely remain with us for some time to come.

Posted by San Diego Real Estate Voice authored by William Johnson on 11/29/2008 08:07 PM

Comments (32)

Foreclosures Take a Holiday Break in the ActiveRain Channel

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32 Comments on Foreclosures to take a Holiday Break.........no kidding!

NOV

This is excellent news, as was the announcement of the modification process. More people staying in their homes is good for the market. I know there are people that will disagree with me on this (like those that are making their payments on time), but we need to protect everyone's value. Thanks for keeping people up to date.

William,

Very good post. I kow about the suspension of the foreclosures, and i think it is a good desion, but not without affecting adversely those who are in this business. What about a listing agent, who can;t submit an offer to the lender?

however, i am trying to get more nformation on loan modification, and I am not sure I understand why 3 months behind is a requirement.

Hi Fred, I will interesting how difference in the end this makes. The work out in the tens of thousands and no real staff to accomplish it. I have an idea, why don't they pay us ( REALTORS and Mortgage Brokers) to go out and help the consumer get their workouts. Seems like we could so this. What do you think?

Jon, that comment is golden, why should they be waiting, why not stop this as soon as possible. And to the workout, we REALTORS should be hired along with other mortgage brokers to go out and help these homeowners get this accomplished. I want to do be a work specialist. The banks and the lenders don't have the personnel to accomplish this.

William - say the new about this on-line (where else?!). While it may be good for those folks who are affected by a potential foreclosure, in the end does it make a difference. As someone alrady said, what about places in foreclosure now where folks want to submit offers?

Jeff

William, this is good, but IMHO it should last longer to help them stay and modify the loans. I wonder if the other banks will do this too. It would be nice to have a moretorium and sell some of the homes that aren't in foreclosure sell.

One would think that lenders would be willing to work out more loans with the borrowers... they should know by now that people paying something is better than people paying nothing... and we don't need more inventory.

Hello Jeff, You raise some good questions. I didn't see this in the papers much. Seems if the government wanted to get the message out, papers are also a good way to to at least try and put a good spin on this, wouldn't ya think?

There are not enough people alive today that would know about this from a previous time. Back then they only had the papers and the radio and the commentators would make it such a story. Despite the tragedy of those times , that voice must have been welcome back then. Today, there is no voice, just noise. And a lot of confusion.

Hi Missy, it would be great because it would also allow for homes to have a some sort of annual appreciation even only a 5 or two. It would at least value some value over time. I hope all this works than I believe it will.

Hi Lane, I sure hear you and I would only hope that other in the decision making process hear you as well. It does seem almost like common sense and that must why the big guys usually don't get it. They often have little of the great asset-common sense.

NOV

William, I think the glut of foreclosures is here to stay for the foreseeable future. We have to get the economy going off the flatlining it is doing right now.

Wish I was smart enough to predict what is best. My key word these days is diversify [myself]. Big changes are coming to the biz of RE.

It will be interesting to see if the other banks and mortgage companies start doing the same thing...

William--I agree with you that many will be happy to be home for the holidays but with that black cloud hanging over them there is still little to celebrate. Like you said, the free fall of pricing needs to stop.

I love the purple hair! I'm afraid many people are pulling their hair out over our current mortgage conditions. Good idea to have experienced real estate agents helping the situation - that's a win-win.

Hi Gary, I would most agree with you. The more difficult issue though is having our industry leadership help us by giving a better direction for us to follow. Regrettably that isn't happening. At least not as yet.

Hi Susie, we are a whirlwind of change and I suppose until the wind slows a bit so we can see where we are, we are bumping all over the place with no clear direction as yet. I do think we could get some training on loan mods and be able to help out. There certainly are not enough staff in the lenders offices to accomplish this.

Hello Sonja, I think that is what the government is counting on here. Otherwise there will not be enough help out there to change directions and stabilize the housing markets.

Hi Teri, I think what may be the hope in this is that if the workouts are successful, there will be a slowing down of the defaults. The bigger issue still not resolved is the debt ratio and the residual values are still dropping. $800 billion works out at about 24,800 per person in this country. If the money were used ( to pay down mortgages )with the citizens instead of the den of financial inequities,a family of four could use the money to pay down the debt. Lenders could lend and we could right the ship.

Interesting how, the lower common demoninator is used to win elections but when the real test comes, it is never actually considered. Put the $800 Billion in the economy and watch how fast the ecomony improves ( almost over night as it were).

Hi Sharon, I Fannie should have purple hair. Thinking out of the box if you will. LOL. I suspect you are right. I guess I could have photo shopped her hair off altogether which might be the better illustration.

PS, I hope your Thanksgiving was wonderful!

I believe that the loan modifications requirement is a good thing. This combined with California's new law that lenders must show that an all out attempt to modify the loan has taken place prior to foreclosure should make a big difference.

You bring up a good point in terms of value. It's unfortunately that we look at everything as an investment. There was a time when a home was about family. Seems to me that the loan modification should be written to include a penalty for bailing on the house due to value.

Frankly value as a reason to bail on the house doesn't make sense to me anyway. There is no value to renting, and the market will come back. We as a country need to get out of our "right now" mentality and learn to wait.

Hi Kate, Your points are certainly well taken. Its back to that need for immediate gratification and the cavalier attitude many have about most things i their lives. I think you points alone, is another whole post about the we as Americans think about most things. It used to be that if a home appreciated a fe percent a year over many years, that was some genuine earned equity. Today, people buy homes and if it has doubled in price in the next couple years they are looking to blame someone. I like the way you are thinking on this!

That will surely give some a little relief during the holidays.

William - It was my suggestion that the banks hire some of the GOOD Realtors and loan officers that have left the business to help with thier REOs, but I don't think they are listening. Your idea may even be better.

Woo Hoo, I hope this whole plan works and that they can sharply reduce the number of foreclosures. That will all of us some relief, including maybe stabilizing the markets and hopefully prices can stabilize as well. That could spell some real R-E-L-I-E-F.

With all the work out and loan mods, using REALTORS and Lenders that can help would go a long way a fixing a lot of things. It would be a real win win.

William...now where did you get that picture of me??? LOL

I agree with you, I think REALTORS, as a whole, should be more loan mod savvy. Too many agents just depend on their lenders to explain things so they don't have to learn the programs.

I hope you had a wonderful Thanksgiving!

DEC

Thanks for the heads up. I am working one now that has been on the market 15 days? It ought to be interesting if nothing else

Shelton

William, excellent article. I predict that foreclosures will continue through 2013. At least that's what my crystal ball indicates.

DEC

Hi Linda, Too Funny! I think we as REALTORS are a valuable source with links into the community that could seriously lend a greater a hand to getting things stabilized. It just can't happen to soon to get the housing market moving on parity again ( The REO's and short sales have hurt the surrounding property values). This needs some serious help and fast.

Hi Gena, I do believe the giant slalom of REO's would abate a bit sooner but I do believe it will be that long at least before we begin to see an sense of appreciation in property values. There will still be greater numbers migrating to California and the southwest states and that might help at least a little. But for now, it will REO into the foreseeable future.

Hi Allen, It will be interesting for most to discover that come the first quarter of next year, there will be more foreclosures than last year at the same time. Why, the credit reporting companies are saying that the number of people behind in their payments is huge and way more than last year. it tells you that many many more are in trouble than is being predicted.

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